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June Hiring Data Stirs Optimism, Spurs Stock Markets

The U.S. private sector served up a burst of hiring in June, but new claims for unemployment insurance remained high at the end of the month, according to new data released Thursday.

The tentatively positive data sent U.S. markets higher as economists raised their forecasts for Friday's much-awaited release of more comprehensive national data on job creation and the unemployment rate for all of June.

Payrolls firm ADP said that private businesses, excluding the farm sector, added 157,000 jobs in June, a solid jump after the tepid 36,000 increase in May over April.

Meanwhile, the Labor Department said unemployment claims fell to 418,000 in the week to July 2, down from 432,000 a week earlier.

Both figures were better than economists had expected, but neither was stellar: The ADP figures were still off the 200,000 monthly pace of job creation in the first quarter.

And the jobless claims were still well above the 400,000 mark, after several weeks in February and March when the weekly figures held below that threshold, giving hopes at the time of a strong economic recovery.

The new ADP figures showed solid hiring both in the services sector -- the largest sector of the U.S. economy -- and manufacturing, with small companies leading the hiring.

But with the jobless rate at 9.1%, some 3.7 million Americans continued to collect unemployment insurance during last month, according to the Labor Department.

The pace of new claims was in the same range as the past two months and a year earlier, underpinning what economists have characterized as a weak spell in the economy during the second quarter.

Analysts Cautiously Optimistic

Analysts were cautiously optimistic about the numbers.

"We'd love to argue that we're sure this is the start of a renewed downward trend" in the jobless-claims figures, said Ian Shepherdson of High Frequency Economics.

The auto industry's annual summer shutdowns for retooling could keep the numbers high over the next several weeks, he said.

Nevertheless, he added, the numbers back the view "that the economy is much better shape than many analysts and investors think."

"We need to see claims drop below the 400,000 mark on a sustained basis to signal the re-emergence of stronger job creation, and at the moment claims seem to have leveled off somewhat above that level," said analysts at RDQ Economics.

On Friday the government will release its national payrolls data for June, which shows the pace of job creation.

The figure for May was a deeply disappointing 54,000 net new jobs in May -- representing an increase of 83,000 in the private sector offset by 29,000 positions lost in government, as authorities slash public spending at the federal, state and local levels.

Taking a cue from Thursday's data, economist Nigel Gault of IHS Global raised his forecast for Friday's payroll gains by 40% to 140,000 -- 165,000 new jobs in the private sector and 25,000 lost in the public sector for the entire month.